TITLE 5. Education
Education Audit Appeals Panel
Notice of Proposed Rulemaking
Audits of K-12 Local Education Agencies
Fiscal Year 2014-15
The Education Audit Appeals Panel (EAAP) proposes to repeal and adopt the regulations described below after considering all comments, objections, and recommendations regarding the proposed action.
A public hearing regarding this proposal is not currently scheduled. Not later than 15 days prior to the close of the written comment period, any interested person, or his or her authorized representative, may make a written request for a public hearing pursuant to Government Code section 11346.8, and a public hearing will be held. Requests for a public hearing should be addressed to Timothy Morgan.
Written Comment Period:
Any interested person, or his or her authorized representative, may submit written comments relevant to the proposed regulatory action. The written comment period closes at 5:00 p.m. on Monday, August 18. 2014. EAAP will consider only written comments received by that time. Written comments for EAAP’s consideration should be directed to:
Christine Pentoney, AGPA
Education Audit Appeals Panel
770 L Street, Suite 1100
Sacramento, CA 95814
Fax: (916) 445-7626
Authority and Reference:
Authority: Education Code section 14502.1; reference: Education Code sections 14502.1, 14503, and 41020.
Informative Digest/Policy Statement Overview:
This rulemaking, and the emergency adoption already made, repeals and adopts title 5, California Code of Regulations, section 19810 to incorporate by reference the 2014-15 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting. This rulemaking also repeals several audit guide regulations that are either obsolete, have expired under their own terms, or are moved to the 2014-15 Audit Guide.
This rulemaking meets the requirements of Education Code section 14502.1, which mandates that an annual audit guide be adopted by the EAAP. The purpose of the audit guide is to define terms and specify procedures to guide accountants in the conduct of statutorily required financial and compliance audits of K-12 local education agencies. The Controller, pursuant to Education Code section 14502.1, has proposed amending the audit guide for fiscal year 2014-15. The proposed changes derive from the Controller’s proposals and also contain changes designed to clarify audit steps, eliminate obsolete and expired regulation sections, and incorporate the 2014-15 Audit Guide by reference.
The regulations proposed for adoption or repeal serve to incorporate by reference the audit guide to be used by private auditors in the conduct of the compliance portion of fiscal year 2014-15 annual audits of K-12 local education agencies. Repealed are obsolete provisions, namely sections that have previously been removed from the audit guide, sections which have expired under their own terms, and sections which stemmed from repealed statutes. The benefit of the proposed changes is to reduce the potential for auditor confusion, eliminate inconsistent audit approaches, improve clarity in the audit guide, and remove sections of title 5 which no longer have applicability.
EAAP does not anticipate that these proposed amendments would create specific benefits for the protection of public health and safety, worker safety, or the environment, the prevention of discrimination, the promotion of fairness or social equity, nor the increase in openness and transparency in business and government. EAAP has determined that the proposed amendments will ultimately benefit the welfare of California residents by ensuring that local education agencies are in compliance with regulatory requirements.
In developing the rulemaking, EAAP evaluated the proposed changes to regulations and determined that they are not inconsistent or incompatible with existing regulations, state or federal.
The proposed 2014-15 Audit Guide incorporates much of the language of the relevant existing regulations, while simplifying language and reorganizing introductory provisions. A listing of the repealed regulations, indicating whether the section is repealed as obsolete or expired, or is being moved to the referenced Audit Guide, a description of new provisions, and a discussion of significant amendments, follows.
Title 5, Division 1.5
Chapter 3. Audits of California K - 12 Local Education Agencies
Article 1 General Provisions
Section 19810 is to be repealed and a new section 19810 added, which incorporates by reference the 2014-15 “Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting” (2014-15 Audit Guide), published by the EAAP. The audit guide provides the audit steps, reporting requirements and other guidance, for the annual financial and compliance audits required by Government Code section 14502.1
The Title 5 sections to be repealed are listed below, by number and title. Some of the sections are included in the 2014-15 Audit Guide. In such cases, brackets follow the sections and include a reference to successor provisions in the proposed 2014-15 Audit Guide. The brackets also identify sections to be repealed if they have expired or are obsolete, namely, previously removed from the audit guide or derived from repealed statutes.
§ 19812. Auditing Standards. [Audit Guide - General Provisions]
§ 19813. Materiality Levels for Compliance Auditing. [Audit Guide - General Provisions]
§ 19814. Auditor Judgment. [Audit Guide - General Provisions]
Chapter 3. Audits of California K-12 Local Education Agencies
Article 2. Audit Reports
§ 19815. Report Components. [Audit Guide - General Provisions]
§ 19816. Definitions and Enumerations. [Audit Guide - General Provisions]
§ 19816.1. Applicability of Audit Procedures by Audit Year. [Obsolete, addresses 2012-13 audits]
§ 19817. Regular and Special Day Classes. [Expired under own terms]
§ 19817.1. Regular and Special Day Classes. [Expired under own terms]
§ 19817.2. Attendance Reporting. [Audit Guide section A]
§ 19817.5. Teacher Certification and Misassignments. [Audit Guide section B]
§ 19818. Kindergarten Continuance. [Audit Guide section C]
§ 19819. Independent Study. [Audit Guide section D]
§ 19820. Continuation Education. [Audit Guide section E]
§ 19821. Adult Education. [See Audit Guide section R for Maintenance of Effort test]
§ 19821.5. California Work Opportunity and Responsibility to Kids (CalWORKs). [Emergency Regulation never used in Audit Guide; repealed by operation of law December 28, 2009]
§ 19822. Regional Occupational Centers and Programs. [See Audit Guide section Q for Maintenance of Effort test]
§ 19823. Instructional Time and Staff Development Reform Program. [Expired: See former Ed. Code §44579.1,repealed effective January 1, 2006; Stats. 2004, ch. 871, §14]
§ 19824. Instructional Time. [Audit Guide section F]
§ 19824.1. Instructional Time. [Expired under own terms]
§ 19825. Community Day Schools. [Previously withdrawn from the Audit Guide]
§ 19825.1. Community Day Schools. [Previously withdrawn from the Audit Guide]
§ 19827. Morgan-Hart Class Size Reduction Program. [Previously withdrawn from the Audit Guide]
§ 19828. Instructional Materials... [Expired under own terms]
§ 19828.1. Instructional Materials. [Expired under own terms]
§ 19828.2. Instructional Materials. [Expired under own terms]
§ 19828.3. Instructional Materials. [Expired under own terms]
§ 19828.4. Instructional Materials. [Audit Guide section G]
§ 19829. Ratios of Administrative Employees to Teachers. [Audit Guide section H]
§ 19829.5. Classroom Teacher Salaries. [Audit Guide section I]
§ 19830. Early Retirement Incentive. [Expired under own terms]
§ 19830.1. Early Retirement Incentive. [Audit Guide section J]
§ 19831. Gann Limit Calculation. [Audit Guide section K]
§ 19832. School Construction Funds. [Previously withdrawn from the Audit Guide]
§ 19833. Alternative Pension Plans. [Previously withdrawn from the Audit Guide]
§ 19833.5. Excess Sick Leave. [Previously withdrawn from the Audit Guide]
§ 19833.6. Notification of Right to Elect California State Teachers Retirement System (CalSTRS) Membership. [Previously withdrawn from the Audit Guide]
§ 19834. Proposition 20 Lottery Funds (Cardenas Textbook Act of 2000). [Previously withdrawn from the Audit Guide]
§ 19835. State Lottery Funds (California State Lottery Act of 1984). [Previously withdrawn from the Audit Guide]
§ 19836. California School Age Families Education (Cal-SAFE) Program. [Previously withdrawn from the Audit Guide]
§ 19837. School Accountability Report Card. [Expired under own terms]
§ 19837.1. School Accountability Report Card. [Expired under own terms]
§ 19837.2. School Accountability Report Card. [Expired under own terms]
§ 19837.3. School Accountability Report Card. [Audit Guide section L]
§ 19838. Mathematics and Reading Professional Development. [Previously withdrawn from the Audit Guide]
§ 19840. Juvenile Court Schools. [Audit Guide section M]
§ 19841. Exclusion of Pupils - Pertussis Immunization. [Expired under own terms]
Chapter 3. Audits of California K-12 Local Education Agencies
Article 3.1. State Compliance Procedures: School Districts, County Offices of Education, and Charter Schools
§ 19843. Local Control Funding Formula Certification. [Expired under own terms]
§ 19844. California Clean Energy Jobs Act. [Audit Guide section S]
§ 19845. Class Size Reduction. [Expired under own terms]
§ 19845.1. Class Size Reduction. [Expired under own terms]
§ 19845.2. Class Size Reduction. [Expired under own terms]
§ 19846. After School Education and Safety Program. [Expired under own terms]
§ 19846.1. After School Education and Safety Program. [Audit Guide section T]
§ 19847. Proper Expenditure of Education Protection Account Funds. [Audit Guide section U]
§ 19848. Common Core Implementation Funds. [Audit Guide section V]
§ 19849. Unduplicated Local Control Funding Formula Pupil Counts. [Audit Guide section W]
Article 4. State Compliance Procedures: Charter Schools
§ 19850. Contemporaneous Records of Attendance. [Audit Guide section Y]
§ 19851. Mode of Instruction. [Audit Guide section Z]
§ 19851.1. Mode of Instruction. [Expired under own terms]
§ 19852. Nonclassroom-Based Instruction/Independent Study. [Audit Guide section AA]
§ 19853. Determination of Funding for Nonclassroom-Based Instruction. [Audit Guide section BB]
§ 19854. Annual Instructional Minutes - Classroom Based. [Audit Guide section CC]
§ 19854.1. Annual Instructional Minutes - Classroom Based. [Expired under own terms]
§ 19855. Charter School Facility Grant Program. [See Audit Guide section DD]
New Provisions in Audit Guide
Section N. Middle or Early College High Schools. This section, as well as the new last sentence in section Z regarding the Mode of Instruction in charter schools, accommodates the provisions of Education Code Section46146.5 which allows for a shorter minimum instructional day for pupils concurrently taking community college courses and enrolled in early college high schools or middle college high schools, and a reduction to 50 percent of the minimum instructional time when charter school pupils in such schools are required to be at the school site. The statute cited also mandates that that the requirements be included in the annual audit guide.
Section O. K-3 Grade Span Adjustment. The section reflects the substitution of a 24-pupil class size target (absent a collectively bargained alternative) for class sizes in kindergarten and grades 1 to 3, which replaces the prior class size reduction incentive laws. Education Code section 42238.02(d)(3)(F) mandates that the instructions necessary to enforce the K-3 Grade Span Adjustment be included in the annual audit guide.
Section P. Transportation Maintenance of Effort; Section Q. Regional Occupational Centers or Programs Maintenance of Effort; Section R. Adult Education Maintenance of Effort. Three “maintenance of effort” provisions are included in the 2014-15 Audit Guide to ensure the appropriate level of expenditures for pupil transportation, regional occupational centers or regional operational programs, and adult education. New legislation requires that the local education agencies’ expenditures in these area equal at least the amount expended in fiscal year 2012-13. (Education Code section2575(j) and (k) and section 42238.03(a)(6) and (a)(7)). The cited Education Code provisions restrict reduction or redirection of funds received in fiscal year 2012-13, for these three services formerly supported by categorical funds. Because these maintenance of effort provisions are new, auditing compliance with them for 2014-15 is appropriate to avoid disruption to those programs and services.
Section X. Local Control and Accountability Plan. The new section provides for testing of expenses which the local education agency identifies as consistent with its required Local Control Accountability Plan’s intended actions or services. Education Code sections 52064(b) and 52067 require districts and county offices of education to list and describe, on templates recently developed by the State Board of Education, the expenditures implementing the specific actions included in the Local Control Accountability Plan. Auditing this newly required reporting is merited to assure smooth implementation of the reforms that implement local control by means of Local Control Accountability Plans.
The most significant changes included in this rulemaking are the inclusion of the audit guide by reference, and the repeal of several code sections as detailed in previous sections. One other substantive change appears in Section V. Common Core Implementation Funds. This provision incorporates language from existing Government Code section 19848 and adds three reporting requirements (paragraphs 3, 4, and 5) in lieu of the more limited first-year provision (section 19848(c)), concerned only with inappropriate expenditures of Common Core State Standard implementation funding.
Disclosures Regarding the Proposed Action:
1. Mandate on local agencies and school districts pursuant to Government Code Section 17500 et seq.: None
2. Cost to any local agency or school district which must be reimbursed in accordance with Government Code Section 17500: None
3. Cost or savings to any state agency: None
4. Other non-discretionary cost or savings imposed upon local educational agencies: None
5. Cost or savings in federal funding to the state: None
6. Significant effect on housing costs: EAAP has made an initial determination that the proposed regulatory action would not affect housing costs.
7. Significant, statewide adverse economic impact directly affecting business including the ability of California businesses to compete with businesses in other states: None.
8. Results of the Economic Impact Assessment: Adoption of these regulations will not:
· create or eliminate jobs within California;
· create new businesses or eliminate existing businesses within California; or
· affect the expansion of businesses currently doing business within California.
Benefit of the proposed regulation to the health and welfare of California residents, worker safety, or the State’s environment and quality of life: As stated under the “Informative Digest/Policy Statement Overview” above, the proposed regulations will update and improve audit procedures of K-12 local education agencies, which would ultimately benefit the welfare of California residents by ensuring that local education agencies are in compliance with regulatory requirements.